SANTA ANA, Calif., Nov. 14, 2007 (PRIME NEWSWIRE) -- Fuel Systems Solutions, Inc. (Nasdaq:FSYS) today reported results for its third quarter ended September 30, 2007, reflecting continued revenue growth and the impact of unusual charges related to its voluntary historical stock option review and subsequently completed restatements last month.
Revenue for the third quarter of 2007 climbed 17.7 percent to $65.2 million from $55.4 million for the same quarter last year, supported by strength of its industrial business and initial contributions from its recently completed Zavoli acquisition. Operating income was $3.4 million compared with $6.6 million a year ago, reflecting the impact of expenses related to its recently completed voluntary historical stock option review. Other expense in the third quarter of 2007 totaled $902,000, primarily from unrealized foreign exchange loss on an inter-company loan, compared with other income of $203,000 during the same quarter in 2006. Income tax expense, which primarily represents foreign taxes, was $2.2 million in the third quarter of 2007, compared with $2.9 million in the same quarter of 2006. For the third quarter, the company reported a net loss of $359,000, or $0.02 per share, compared with net income of $3.1 million, or $0.20 per diluted share, for the comparable period of the prior year. Stock option review and restatement charges were approximately $2.8 million, or $0.18 per diluted share, for the 2007 third quarter.
For the nine months ended September 30, 2007, revenue increased 10 percent to $185.6 million from $168.7 million a year earlier. Operating income for the same period was $10.3 million compared with $18.0 million for the same period last year. Other expense of $1.6 million for the nine-month period consisted primarily of an unrealized foreign exchange loss on an inter-company loan compared with other expense of $1.0 million for the comparable nine month period last year, primarily from unrealized foreign exchange loss on the same inter-company loan noted above. Income tax expense, which primarily consists of foreign taxes, was $5.9 million during the nine months of 2007, compared with $7.5 million for the same period last year. Net income for the nine months ended September 30, 2007 was $1.1 million, or $0.07 per diluted share, compared with net income of $8.1 million, or $0.54 per diluted share, for the comparable period last year. Historical stock option review and restatement charges were approximately $4.7 million, or $0.30 per diluted share, for the nine-month period ended September 30, 2007.
Outlook
"The company is on track to achieve revenue of at least $255 million for 2007. Growth continues to be supported by three primary market drivers: high oil prices, an increasing global focus on tangible energy security and expanding regulatory support for clean air solutions globally," said Mariano Costamagna, president and chief executive officer of Fuel Systems Solutions.
He added that the gross profit margin for 2007 is expected to be approximately 23 to 24 percent. Costamagna noted that the gross profit margin year to date has been impacted by approximately one percent from previously reported guidance due to a required accounting reclassification concerning the amortization of expenses for existing technologies and customer relationships previously classified under amortization of intangibles, and now reclassified under cost of revenue. Costamagna emphasized that the gaseous fuel industry is experiencing some competitive pricing pressure in the transportation sector, particularly within the European market. He believes this situation is short term, with the company focused on longer-term strategies. "The ability of less global competitors to continue to gain market share based upon pricing alone is difficult for these companies to sustain in a market where technology provides a long-term competitive edge. As a result, we believe there are numerous opportunities to expand sales based upon our global production and distribution capabilities. Furthermore, we expect to further leverage our leadership position to increase market share through the acquisition of smaller competitors and the addition of synergistic technologies to broaden the company's product range -- which will further distinguish Fuel Systems Solutions, enhance its long-term growth potential and increase profitability," Costamagna said. He added that he expects the company's industrial business to continue to be strong, supported by new EPA Tier III emission regulations that took effect in January of this year and future more stringent emission regulations pertaining to gaseous fuel-powered generators and off-highway equipment.
As a result of unusual items described below, the company anticipates operating margin will be approximately 5 to 6 percent for 2007. Factors impacting the company's performance include approximately $5.2 million related to the total costs for voluntary historical stock option review and financial restatements, of which $4.7 million has been recognized though the third quarter of this year. In addition to the financial restatement costs, operating expenses for the nine month period were also affected by additional accruals of approximately $0.6 million related to the company's previous occupancy at its Cerritos facility and $0.9 million for a marketing campaign in Europe that commenced in the first quarter of 2007. Excluding these factors, operating margin would be approximately 7 to 8 percent for 2007.
"Our strong financial position enables the company to take advantage of value-added acquisition opportunities, as well as the resources to support investments to accelerate our growth," Costamagna said.
Teleconference and Web Cast
Mariano Costamagna, president and chief executive officer, and Thomas M. Costales, chief financial officer, will host an investor conference call on Friday, November 16, at 10:00 a.m. Pacific Time to discuss the company's financial results and operations for the quarter. The call will be open to all interested investors, either through a live audio Web broadcast via the Internet at http://fuelsystemssolutions.com or live by calling (888) 278-2390 (domestic) or (706) 634-2132 (international) with call ID number 24887262. For those who are not available to listen to the live broadcast, the call will be archived for two weeks on Fuel Systems Solutions' Web site. A telephone playback of the conference call will also be available from 2:00 p.m. Pacific Time Friday, November 16 through 11:59 p.m. Friday, November 23 by calling (800) 642-1687 (domestic) or (706) 645-9291 (international) and using access code: 24887262.
Fuel Systems Solutions is a holding company currently comprised of two operating subsidiaries, IMPCO Technologies and BRC Gas Equipment. Additional information is available at www.fuelsystemssolutions.com. IMPCO designs, manufactures, markets and supplies advanced products and systems to enable internal combustion engines to run on clean burning gaseous fuels such as natural gas, propane and biogas. IMPCO is a leader in the heavy duty, industrial, power generation and stationary engines sectors. Headquartered in Santa Ana, California, IMPCO has offices throughout Asia, Europe, Australia and North America. Additional information is available at www.impcotechnologies.com. BRC produces a complete range of systems for converting vehicles to gaseous fuel to meet market requirements. BRC is a leader in the light duty and automobile alternative fuel sectors and has established alliances with several major automobile manufacturers for OEM projects. Headquartered in Cherasco, Italy, BRC has offices throughout Asia, Europe and South America. Additional information is available at BRC's web site, http://www.brc.it.
The matters discussed in this press release under the heading "Outlook" are forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in any forward-looking statement. Those forward looking statements include statements relating to its continued industrial business segment ramp up; the company's ability to achieve revenue target of at least $255 million; expected gross profit margin of 23 to 24 percent; expected operating margin of 5 to 6 percent in 2007 (or 7 to 8 percent excluding certain factors); and, its ability to identify and complete acquisitions, add synergistic technologies and leverage these initiatives to enhance its leadership position. Factors that could cause or contribute to such differences between our expected future results and actual results include, but are not limited to, prevailing market and global economic conditions -- including increasing regulatory support and competitive pricing pressure which the company believes is short term; changes in environmental regulations that impact the demand for the company's products; the company's ability to manage its leverage and address operating covenant restrictions relating to its indebtedness; the company's ability to negotiate and comply with waivers pertaining to existing loan covenant defaults; the company's ability to design and market advanced fuel metering, fuel storage and electronic control products; the company's ability to meet OEM specifications; and the level and success of the company's development programs with OEMs. Readers also should consider the risk factors set forth in the company's reports filed with the Securities and Exchange Commission, including, but not limited to, those contained in "Management's Discussion & Analysis of Financial Condition and Results of Operation - Risk Factors" section of the company's Quarterly Report on Form 10-Q, for the quarter ended September 30, 2006. The company does not undertake to update or revise any of its forward-looking statements even if experience or future changes show that the indicated results or events will not be realized.
FUEL SYSTEMS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
-------- -------- -------- --------
Revenue $ 65,235 $ 55,437 $185,621 $168,677
Cost of revenue 49,530 40,188 141,650 126,163
-------- -------- -------- --------
Gross Profit 15,705 15,249 43,971 42,514
Operating expenses:
Research and development
expense 2,010 2,168 6,094 6,317
Selling, general and
administrative expense 10,214 6,485 27,446 18,044
Amortization of intangible
assets 85 36 168 106
-------- -------- -------- --------
Total operating expenses 12,309 8,689 33,708 24,467
-------- -------- -------- --------
Operating income 3,396 6,560 10,263 18,047
Other income (expense), net (902) 203 (1,566) (1,002)
Interest expense, net (203) (71) (693) (341)
-------- -------- -------- --------
Income before income taxes
and equity share in income
of unconsolidated affiliates 2,291 6,692 8,004 16,704
Equity share in income of
unconsolidated affiliates 114 39 384 353
Income tax expense (2,224) (2,903) (5,856) (7,534)
-------- -------- -------- --------
Income before minority
interests 181 3,828 2,532 9,523
Minority interest in income
of consolidated subsidiaries 540 702 1,477 1,387
-------- -------- -------- --------
Net income (loss) $ (359) $ 3,126 $ 1,055 $ 8,136
======== ======== ======== ========
Net income (loss) per share:
Basic $ (0.02) $ 0.21 $ 0.07 $ 0.55
======== ======== ======== ========
Diluted $ (0.02) $ 0.20 $ 0.07 $ 0.54
======== ======== ======== ========
Number of shares used in per
share calculation:
Basic 15,490 15,102 15,383 14,791
======== ======== ======== ========
Diluted 15,490 15,332 15,600 15,106
======== ======== ======== ========
FUEL SYSTEMS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
September 30, December 31,
2007 2006
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 26,279 $ 11,546
Accounts receivable less allowance for
doubtful accounts of $2,513 and $2,390 46,164 44,246
Inventories:
Raw materials and parts 29,500 28,072
Work-in-process 3,304 2,507
Finished goods 33,936 25,948
--------- ---------
Total inventories 66,740 56,527
Other current assets 4,141 2,588
Related party receivables 181 2,442
Deferred tax assets 3,056 2,658
--------- ---------
Total current assets 146,561 120,007
Equipment and leasehold improvements
Dies, molds and patterns 6,601 6,476
Machinery and equipment 23,262 18,475
Office furnishings and equipment 8,359 7,318
Automobiles and trucks 1,910 1,394
Leasehold improvements 4,008 4,122
--------- ---------
44,140 37,785
Less accumulated depreciation and
amortization 20,582 16,498
--------- ---------
Net equipment and leasehold improvements 23,558 21,287
Goodwill 45,689 39,995
Intangible assets, net 13,305 10,361
Investment in unconsolidated affiliates 1,894 1,374
Other assets 1,541 2,130
Non-current related party receivable 4,179 3,358
--------- ---------
Total Assets $ 236,727 $ 198,512
========= =========
FUEL SYSTEMS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
September 30, December 31,
2007 2006
---- ----
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 45,542 $ 28,625
Other accrued expenses 22,335 19,911
Current revolving line of credit 3,092 9,103
Current maturities of other loans 4,080 2,948
Current maturities of capital leases 429 367
Related party payables 5,213 2,802
--------- ---------
Total current liabilities 80,691 63,756
Term loans 10,587 5,846
Capital leases 511 671
Other liabilities 5,884 6,325
Minority interest 5,933 4,816
Deferred tax liabilities 7,515 6,320
--------- ---------
Total liabilities 111,121 87,734
--------- ---------
Stockholders' equity:
Preferred stock, $0.001 par value,
authorized 1,000,000 shares; none issued
and outstanding at September 30, 2007
and December 31, 2006 -- --
Common stock, $0.001 par value, authorized
200,000,000 shares; 15,504,560 issued
and 15,490,878 outstanding at
September 30, 2007 and 15,192,409 issued
and 15,180,481 outstanding at
December 31, 2006 15 15
Additional paid-in capital 216,206 212,275
Shares held in treasury (423) (460)
Accumulated deficit (108,229) (109,077)
Accumulated other comprehensive income 18,037 8,025
--------- ---------
Total stockholders' equity 125,606 110,778
--------- ---------
Total Liabilities and Stockholders'
Equity $ 236,727 $ 198,512
========= =========